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3 Loss Prevention Red Flags Your Retail Software Solution Should Be Monitoring

Image showing business data and a small plastic red flag

Analytics gathered by a retail software solution can do more than highlight consumers’ buying habits or detect high-selling inventory; analytics can also improve your loss prevention strategy.

For many retailers, loss prevention is about using anti-shoplifting technology, such as electronic surveillance tags that trigger an alarm when unpaid merchandise is near a store exit. However, a retail software solution can gather data that shows abnormal or negative trends, and gives retailers the ability to drill down within the data to investigate and resolve issues.

For example, have you noticed an increase in manual price changes or discounts entered into your store’s point of sale (POS) checkout? Have there been more voided receipts lately? A retail software solution can gather this type of data and help to improve your loss prevention strategy by controlling retail shrinkage, identifying intentional and unintentional loss, and spotting fraud or theft.

Gathering analytics for a loss prevention strategy requires a system that tracks information, has the ability to set event triggers where fraud can occur, and displays the data in a way that enables you to quickly detect and resolve issues.

Here are a few loss prevention “red flags” to set up in your retail software solution.

  1. Scrutinize employee activity: Establish some baseline trends as part of your loss prevention analytics so that activity outside the norm will trigger a notification or an alert to investigate. This is helpful in identifying employee behavior as a factor in unintentional or intentional retail loss.

    Let’s say you establish a baseline for the average number of merchandise returns per week. This weekly average of two merchandise returns remains consistent among your 10 employees who manage a retail POS register. Then, you detect a spike of 20 merchandise returns when a particular employee is operating in the same environment.

    While that data alone is not enough to draw conclusions, it could alert you to set up additional triggers in your retail software solution to track data at a granular level, such as further investigating if the spike in merchandise return activity is consistent with seasonal trends. If the analytics reveal abnormal trends, you now have data to warrant a further investigation to determine whether fraud actually occurred, or the employee simply didn’t understand the store’s return policy.

  2. Set triggers for specific transactional procedures: Ensuring that your employees and management follow store policies and procedures is vital to your loss prevention strategy. Transactions that are not part of normal business operations, such as issuing returns for non-returnable merchandise like damaged items, can lead to lost profit and inventory inconsistencies.

    Procedural triggers to set up in your system include voided receipt lines greater than a specific amount, giving a discount greater than a specific percentage, or the number of cash refunds when the original payment was made with a credit card. From a presentation point of view, some of the nicer ERP systems have dashboards built specifically for loss prevention. These dashboards can quickly alert you to “trends of interest” and could also be set up to notify a person via email or text when certain thresholds have been met.

    In addition to analytics, a retailer can set up the retail POS software to only allow a manager to authorize price overrides or discounts. Some retail software solutions allow for add-on features like a security camera or surveillance system to record retail POS transactions in real time. The security footage can reveal whether the item scanned matched the quantity or description of what was entered into the system, serving as another check-and-balance in your loss prevention strategy.

  3. Increase data gathering as a means of controlling inventory shrinkage: It’s better to find out sooner than later about high inventory shrinkage, meaning a discrepancy between the inventory physical count and the quantity recorded in a retail management system. Loss prevention analytics can alert retailers to possible high inventory shrinkage before a physical inventory count.

More than just alerting retailers about fraud or theft, analytics can detect inefficiencies that lead to unintentional loss. Whether it’s an employee in need of more training to understand store return policies and properly operate the retail POS cash register, or a fraudulent customer taking advantage of the store policies or employees, using analytics can help you to target and resolve problems as part of your loss prevention strategy.